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SERIES 66: Series66 (Series66) NASD Series 66
Free Practice Exam Questions (page: 5)
Updated On: 10-Jan-2026

Page 5 of 52
PDF with 251 Questions

The measure of return for the yield to maturity of a bond is:

  1. Par x $1,000
  2. Total return
  3. The internal rate of return
  4. Call risk

Answer(s): C

Explanation:

When calculating an investment's future value we use the formula Pn=Po(1+r); to calculate present value, or the investment amount needed today to reach a future financial goal, we use the formula Po=Pn/(1+r)n. It is also helpful, if you have the numbers for Pn or Po,to find "r", the rate of interest on an investment. This calculation is most easily solved by a manual trial-and-error method using an electronic calculator. The resulting figure is known as the internal rate of return (IRR). A trial-and-error manual calculation is now easily solved by most electronic calculators



Jane and Fabbio Salvatore have just discovered that a Fabulous Florence municipal bond will be offered to support a bridge development in Fabbio''s hometown in Florence, OH. They want to purchase the bond at $1,000, but end up buying the 10% bond at $1,020. One year later, the Salvatores want to sell and earn a profit when the market value is at $1,000. Calculate the total return of the Fabulous Florence bond.

  1. 9.98%
  2. 12%
  3. .0196%
  4. 2%

Answer(s): A

Explanation:

The test will try to confuse you by adding extra details to the questions. It doesn't matter that the Salvatores wanted to buy at $1,000 when, in fact, they bought at $1,020. Furthermore, one year later when the market is at $1,000, their bond has actually depreciated. Only 9.98% could be the answer. The total return will reflect the interest earned (yield) plus or minus any appreciation or depreciation (growth).
While the bond earns 10% interest, it has lost nearly 1% of its value and delivers a total return of 9.98%. ($1,020-$1,000 = $20)/$1,020 = .0196%. (10% + (-.0196%) = 9.98%



Lucky Lavallee has just opened Casino Lavallee, a small operation in Vermont with 10 slot machines, five blackjack tables and a separate room for poker games. His mother, Helene, has offered to finance part of the business in return for a share of the profits, but she is concerned about risk.
Which type of business structure would be the most suitable for Casino Lavallee?

  1. Family Limited Partnership
  2. C Corporation
  3. Limited Liability Company
  4. Estate

Answer(s): C

Explanation:

In a limited liability company (LLC), the owners are not personally liable for a company's debts. LLCs are advantageous from a tax standpoint because the owners are taxed at their personal income tax rate on their share of the profits only. Additionally, LLCs are easy to set up and have more flexible management structures than a corporation. Under a C corporation structure, Helene would not be personally responsible for the company's liabilities. However, the size of this casino does not necessarily warrant the added expense and complication of incorporating. A family limited partnership is generally formed, with a legitimate business purpose, to minimize estate and gift taxes.



At year-end 2004, the Federal Reserve reported moderate economic growth of 3%, a reduction of the unemployment rate to 3% and an inflation rate that was "well contained at 3%". Under these circumstances, the real interest rate of the 10% corporate bond you own is 7% this year.
Which of the following economic factors would factor in to the real interest rate of your bond?

  1. Economic growth at 3%
  2. The Fed Funds rate
  3. Unemployment at 3%
  4. Inflation at 3%

Answer(s): D

Explanation:

The real interest rate, also referred to as the inflation-adjusted return, factors the eroding effect of inflation from an investment's return. The formula is: Yield plus or minus inflation rate = real interest rate/inflation-adjusted return. The Fed Funds rate is the market rate that banks charge each other on overnight loans of reserves



Which of the following represents the best investment for someone whose objective is growth?

  1. Common stocks
  2. Money market funds
  3. Corporate bonds
  4. Long-term CDs

Answer(s): A

Explanation:

Common stock would be a suitable recommendation for someone whose investment objective is growth. The other options represent investment vehicles that carry less risk and offer preservation of capital.



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